The Opportunity Zones Program offers a groundbreaking federal tax incentive designed to encourage development in some of the nation’s most economically distressed areas. Created as a result of the Tax Cuts and Jobs Act of 2017, the Opportunity Zones Program, or O-Zones Program, permits borrowers to defer paying their capital gains taxes until 2027, provided that they invest in an Opportunity Fund, a special financial vehicle which must invest at least 90% of its assets in a Qualified Opportunity Zone. With their long terms, high leverages, and low interest rates, HUD multifamily loans are ideal for developing multifamily properties in Opportunity Zones.
The Rental Assistance Demonstration (RAD) Program is a federal housing program administered by HUD, which was enacted in 2012 as a part of the Consolidated and Further Continuing Appropriations Act. The RAD program allows properties using HUD legacy programs to convert their properties to HUD Section 8 housing, which is much better understood, and more easily permits the use of private capital to fund rehabilitation work.
One of the most common misconceptions about HUD is that it focuses only on low-income, Section 8, and affordable housing. In reality, the HUD 223(f) program is available for all types of market-rate multifamily properties.
Some multifamily developers and investors shy away from HUD loans. Many feel there is a stigma attached to them. Others misunderstand the products, believing they are only for low-income and affordable housing projects. However, these things are not true. In comparison, HUD multifamily loans have several benefits which make them some of the best products in the business:
Many people aren’t aware that FHA-insured financing offers some of the industry’s longest terms. For example, the HUD 221(d)(4) program is a fixed-rate construction loan. This product is fixed for 40 years plus up to 3 years for construction (43 years total). And HUD 223(f) loans are fully amortizing for as long as 35 years (as long as the term and amortization isn’t more than 75% of the property's remaining economic life).
Although HUD (the US Department of Housing and Urban Development) and the FHA (the Federal Housing Administration) were founded separately, they share many things. For example, HUD oversees residential and multifamily insurance programs. In contrast, the FHA primarily deals with residential lending for primary residences.